Paul L. Caron

Monday, March 2, 2009

Yet Another Obama Nominee's Tax Problems

Kirk1 Add Ronald Kirk, former Dallas mayor and President Obama's U.S. Trade Representative nominee, to the long and growing list of administration nominees and officials with tax problems.  The Senate Finance Committee today released a three-page report detailing various mistakes on Mr. Kirk's 2005-2007 tax returns.  Mr. Kirk has agreed to pay almost $10,000 in additional taxes for, among other things, wrongly deducting $17,000 for season tickets to the NBA Dallas Mavericks and wrongly taking charitable deductions for contributions of honoraria from speaking fees from Austin College even though he had not included the honoraria in his income.

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This is Income Tax 101. What is income?

Sure sounds as if it's an accretion of wealth. The omission isn't an honest mistake and it isn't an example of tax gotcha. It's evidence of a lack of character and integrity. Character is how we act when no one is looking. If we know this about him before he gains appointment, why appoint him?

Posted by: SAM | Mar 7, 2009 9:13:25 PM

No mercy here. In fact, Mayor Kirk should consider himself lucky if he does not have to substantiate his "agreement" with the partnership to incur expenses on their behalf. UPE is deductible only if their is a partnership agreement in place that states partners are required to incur expenses on behalf of the partnership. Generally, he should submit the expense to the partnership and get reimbursed directly from the partnership if no such agreement is in place.

Posted by: gcwright | Mar 4, 2009 12:12:08 PM

Why should this surprise anyone? This is the M.O. of the Obama cabinet members.
The IRS is setting precedent for all the other taxpayers who made "honest" mistakes and who will want the same treatment, no penalties and limited interest.
D Snow

Posted by: D.Snow | Mar 3, 2009 12:59:57 PM

Well, I guess I can never work in any administration, Democrat or Republican, seeing as how I've filed 1040X's for multiple years of my tax returns. This game of tax gotcha is starting to get ridiculous.

Next, we'll find a nominee who incorrectly paid too much tax, then files to get the extra back and we vilify him/her for doing so.

Posted by: yqergdsfg | Mar 3, 2009 10:26:45 AM

Kirk is a prime example of the problem in Obama's proposed cap on charity deductions. A good friend is a leading tax attorney. Here is what he had to say on the honoraria issue:

"There appears some inconsistency in his treatment of the honoraria. In 2005, he received 4 honoraria totaling $7,500 which he failed to report as income, but for which he claimed a charitable deduction. For 2006, he received a 1099 for one $5,000 honorarium which he did not report and which was found by the IRS as part of its 1099 matching process. These 5 items are problematic errors. There is no apparent explanation for these errors or excuse other than carelessness.

Other than the above 5 honoraria, the pattern with respect to the other 16 honoraria is, in our opinion, a series of honest mistakes arising out of well intentioned charitable acts. Technically, Mayor Kirk should have reported the honoraria and then claimed corresponding charitable itemized deductions. As a person with high income, his itemized deductions are effectively reduced by the tax law so he would not have a deduction which perfectly offset the income. I.e., he would wind up with some tax due on the honoraria despite the charitable deduction. The reason that he has to report the honoraria as income is that he was the person who earned it and he cannot avoid that consequence by “assigning” the right to receive that income to the charity. This is the “assignment of income” doctrine. We do not believe that a person who is not a tax professional would readily recognize the assignment of income doctrine, hence our conclusion of an honest mistake."

But, like Geithner, Rangel, Daschle, et al -- why worry about the rules when you choose not to follow them? Doesn't the fact that the tax code is so complex, that this collection of the smartest guys in the room, can't stay within the rules? Isn't that a warning sign to these chosen ones?

Posted by: Scott | Mar 3, 2009 9:07:59 AM

Another Obama Administration nominee, another tax cheat. News at eleven.

Posted by: Lynne | Mar 3, 2009 5:56:34 AM